The market opened modestly higher Monday morning in response to the shift away from imposing tariffs on Mexico over the weekend and then treaded water the rest of the week to register 0.47% gain by the closing bell on Friday. The Ten Year-Treasury rate was also steady, ticking up one basis point to 2.09%. There was no discernible progress on the U.S./China Trade talks, and the economic indicators (CPI, PPI, Michigan Sentiment, and Retail Sales) all came in on the low side of forecasts suggesting some softening as a result of the trade concerns. There was weakness among chipmakers after Broadcom warned of a slowdown in global demand citing the trade uncertainties and export restrictions on Huawei.
In contrast to the hum-drum action on Wall Street, things got exciting in the Kuby household with the arrival of my first grandchild, the lovely Jane Olivia (Kuby) Olson. Congratulations to Michelle and David.
There are a number of macro events in focus this week, with the FOMC decision Wednesday afternoon clearly the most important. The Fed is widely expected to set the stage for a rate cut but investors will be parsing the language closely and scrutinizing the updated dot plot to get a sense for how long/deep the easing cycle could be (the market is roughly assuming three cuts in total for ’19 while the last dot called for rates staying unchanged). There is also about a 25% chance of a rate cut at this week’s meeting, which at least initially would probably trigger a stock market rally. Barron’s this weekend has an article that suggests the economy does not need any rate cuts, even though the market clearly wants them. The flash PMIs on Fri will also be important given the recent indications of slowing global growth in the last few weeks (the flash PMIs are the first major data point for the month of June).
Stocks in the News:
U.S. Auto Parts Network, Inc. (PRTS) +17.76%: U. S. Auto Parts is an online provider of automotive aftermarket parts. The company principally sells its products to individual consumers through its network of websites and online marketplaces. Significant insider purchases from multiple executives and board members have inspired confidence in the investing public. PRTS is a 2.14% holding in the North Star Micro Cap Fund.
Boot Barn Holdings, Inc. (BOOT) +15.15%: Boot Barn operates specialty retail stores, selling western and work‑related footwear, apparel and accessories in the United States. BOOT announced an amendment to its credit facility which increased the size and extended the maturities. In conjunction with the amendment, the company made a prepayment of $65.0 million, reducing the balance outstanding from $176.5 million to $111.5 million. As a result of these amendments and the prepayment of the term loan, the Company now expects interest expense for the fiscal year ended March 28, 2020 to be $14.5 million, compared to its previous guidance of $15.5 million. BOOT is a 4.5% holding in the North Star Micro Cap Fund.
Superior Group of Companies, Inc. (SGC) +15.59%: Superior is engaged in designing, manufacturing, and distribution of uniforms to major domestic retailers, foodservice chains, transportation and other service industries. It provides customer-specific uniform eStores, custom Image apparel, corporate identity apparel, career apparel, and accessories including remote staffing solution and call center operations for the medical and health fields also for industrial, commercial, and leisure. SGC shares recouped their losses from the month of May that were triggered by first quarter results that fell short of analyst expectations. SGC is a 3.43% holding in the North Star Micro Cap Fund.
TransAct Technologies Incorporated (TACT) +23.95%: TransAct Technologies is a global leader in developing software-driven technology and printing solutions for high-growth markets including restaurant solutions, POS automation, casino and gaming, lottery, and oil and gas. TACT secured its largest order to date for its BOHA! store automation platform with an expected annual average revenue per unit of approximately $1,700. The order from an international food service brand includes the deployment of BOHA! hardware and software across an initial 1,000 locations that will roll out by the end of 2019, plus potential deployments for an additional 2,000 to 3,000 locations over the next two to three years. TACT is a 1.67% holding in the North Star Dividend Fund.